A combination of too many students, grade inflation and a stalled economy have
created a toxic combination for any new graduate seeking paid graduate jobs.

After a nail-biting few weeks, the results are in, the champagne corks have popped and graduates up and down the country are breathing a sigh of relief. The hard graft is over, and all that remains for many of the class of 2012 is to attend their graduation ceremonies and toss their mortar boards in the air with a sense of pride.

But after the celebrations have finished, mortar boards aren’t the only things that will come crashing back down to earth this summer. The hundreds of thousands of graduates entering the jobs market over the next few months face increasingly bleak prospects, according to new studies of graduate recruitment.

The latest report, published yesterday, suggests that the labour market has become so competitive that top employers are screening out graduates who fail to gain first-class degrees. Employers say they are so swamped with applications that filtering candidates by the best degree classifications is one of the easiest – and cheapest – ways to reduce the shortlist, the report by the Association of Graduate Recruiters (AGR) says.

A separate study out yesterday by High Fliers Research, a market research company, shows that in 70 per cent of cases, graduate employers demand at least a 2:1 degree. Application levels are now some 25 per cent higher than three years ago, partly because of the backlog of graduates still looking for work since the recession.

An average of 73 students compete for each job, although that number rises to 154 in the retail industry and 142 for investment banking posts. Meanwhile, the number of first-class graduates has more than doubled over the past decade, figures show.

Martin Birchall, managing director of High Fliers Research, says that the demand for first-class intellectual prowess is coming from the top investment banks, consultancies, law firms and accountants in particular.

“The number of first-class and 2:1 degrees has increased notably over the past 10 years – it’s becoming an absolute minimum standard,” he says. “If, during an interview, undergraduates say they might not get a 2:1 after all, many have to withdraw their applications.”

Accountants PricewaterhouseCoopers, the biggest graduate employer, received 33,000 student and graduate applications for around 2,500 jobs this year, although it does recruit on other factors besides academic achievements. Other industries are experiencing the same overload; oil giant BP received 7,000 applications for 244 jobs, while Jaguar Land Rover saw the number of applicants for its scheme rise by 61 per cent over the year to 10,632.

“The volume of applications is so high that companies could fill their places three or four times over with good candidates,” Mr Birchall says. “They will regret that they can’t view all candidates – it’s incredibly harsh, but many good ones slip through the net.”

Michael Barnard, product manager at Milkround, the graduate careers advice site, says the problem stems from the height of the recession, when many big employers froze their graduate schemes. “This created a graduate jobs backlog, or debt, which we haven’t managed to clear yet. It’s really tough for graduates to find work,” he says.

“Graduates can’t expect to just walk into a decent job any more. If you want to work in London – God forbid, it’s the hardest place to find a job in the world – you will have to accept that you probably need to live in a house-share with five strangers, work in a café to pay the bills and start at the bottom with a big employer.”

He agrees that the UK’s financial industry is driving the trend to filter applications by academic achievement. Other sectors, particularly the creative ones such as media, are less concerned about grades and more interested in skills, extra-curricular activities and experience, he says – something that universities often overlook.

“Universities should pay more attention to creative students, where it’s more about what you’ve done at university, the clubs you’re part of, and so on,” he says.

Those employers who sift applications based on academic achievement do also use an online application form, aptitude tests, competency-based interviews and telephone interviews, according to the High Fliers report, based on interviews with the UK’s top 100 graduate employers. Personality questionnaires and group exercises at selection centres are also used to assess how well-rounded a candidate is, giving applicants the chance to show off “softer” skills beyond academic achievements, such as team-working, communication and presenting skills.

But if the majority of employers specify a 2:1 minimum, many candidates with 2:2 degrees or lower won’t get the chance to show off how “rounded” they are if they cannot apply to start with, Mr Birchall says.

Tanya de Grunwald, founder of GraduateFog, a careers website, and who is leading a campaign against unpaid graduate internships, says the balance of power has shifted dramatically to employers in recent years. “Many graduates are having their self-esteem chipped away as they don’t even get a rejection letter. It is a buyers’ market, with graduates having to work harder and harder to get noticed,” she says.

She believes that the push under the previous Labour government to get half of all young people to go to university has hoodwinked young people into thinking that if they get a degree, a well-paid job and high-flying career path will follow. But many of Britain’s top employers still prefer to recruit Oxbridge graduates, she says, meaning that applicants with lower grades, who went to a non-Russell Group university, stand little chance of being seen.

Graduates who have worked hard at university feel they are being let down by the system. More than a third are starting jobs at the non-graduate level because they have no choice, official figures show.

Cait Reilly, a geology graduate from the University of Birmingham, made headlines this year when she decided to take legal action against the Government for being forced to stack shelves in a Poundland store. She had been unable to find work in her subject area and was claiming jobless benefits while volunteering in a museum. But the 22-year-old was told to give up her placement to work at the high street retailer under a government scheme designed to get the unemployed back to work.

Miss de Grunwald says that increasingly, graduates are being forced to work for free with big employers just to get a foot on the career ladder, but this limits opportunities for those from poorer or disadvantaged backgrounds who cannot afford to carry out three‑month unpaid placements.

Mr Birchall suspects “grade inflation” is behind the huge increase in the number of high achievers who have to lower their expectations when they get to the real world of work; a trend that begins at school. “The minute A-star grades were introduced at A-level was a sign that the A-level system is broken as well,” he says. “It has led to a whole generation of pupils applying to university because they want to, not necessarily because they have earned it.”

But Miss de Grunwald is not convinced. “Companies just can’t be bothered to think of a new way to sift applications. There are plenty of reasons why people get 2:2s – perhaps they had family issues, or an illness, or maybe they’re not academic. But they’re good at other stuff, such as building networks or communicating with people, which is essential in careers such as sales.”

Something the experts can agree on is that the grim surveys of recent weeks revolve only around the biggest graduate employers and do not reflect all companies who hire graduates. Plenty of small- to medium-sized businesses (SMEs) are “crying out” for skills and struggle to recruit graduates because they are less well-known, Miss de Grunwald says.

Metaswitch Networks, a fast-growing technology company based in Enfield, hires about 40 graduates a year but has no stringent requirements on academic grades. James Madeley, graduate recruitment manager, says: “Academic ability is an indicator of how clever someone is, but for us it’s about how graduates can logically think through a problem and solve it. We interview and test for that, as a specific skill, rather than degree attainment.”

He thinks universities should forge better links with SMEs to help open graduates’ eyes to the many opportunities that lie outside of the big 100 companies. Mr Barnard agrees: “Candidates unlucky with the big firms can find small- and medium-sized businesses close to the experience they are looking for who are willing to recruit. You’d get more responsibility, quicker,” he says.

For some, it may work out better to avoid the structure and predictability of the large graduate recruitment schemes, Miss de Grunwald argues.

“There are an awful lot of other jobs out there, where graduates can get broad experience and pick up lots of skills. Those that don’t get on to the big schemes have almost dodged a bullet.”